Mt.Gox "Finds" Nearly Quarter Of Bitcoins It Had Said Was Missing

The latest news out of insolvent Bitcoin exchange Mt.Gox will hardly boost confidence in the safety of the digital currency, after last night it announced that it had "found" nearly a quarter, or 199,999.99 of the bitcoin it had previously reported as missing. Mt.Gox Chief Executive Mark Karpeles said his insolvent company found the 200,000 bitcoin assumed lost in a digital wallet, or storage file, that hadn't been used since 2011. As a reminder, when Mt.Gox filed for bankruptcy at the end of February, it reported 850,000 bitcoins were lost, mostly belonging to its customers, with Karpeles stating at the time only 2,000 bitcoin were left, blaming hackers and technical issues for the loss. It turns out there may have been more than met the eye, and one can surely accuse Karpeles of a completely lack of knowing what was truly going on at his company.

As WSJ reports, following the announcement, "some users investigated the possibility that some coins were still inside Mt. Gox, once the dominant exchange for the virtual currency. Bitcoin transactions are tracked via an online ledger, leading many users to hope that at least some bitcoins could be tracked down and recovered."

Mr. Karpeles said in the announcement, released Thursday, that the exchange was continuing to investigate the scope of the loss, raising the specter that bitcoin that had been assumed to be stolen could be hiding out in other accounts or files the exchange had lost track of.

"We believed there were no bitcoins left in old wallets, but found 199,999.99 bitcoins on March 7," Mr. Karpeles said in the Thursday announcement. Mt. Gox said it reported the discovery of the bitcoin to its lawyers on March 8 and moved the discovered bitcoin to offline storage between March 14 and 15.

Mt. Gox didn't specify whether the found bitcoin were those of customers or bitcoin owned by the exchange itself.

One wonders just where said "wallet" was located: hopefully not in Mark's back pocket, whose recent actions and disclosures certainly leave the door open for a criminal embezzlement investigation. At least the hopes of naive users of the exchange have raised that some of their lost funds will be uncovered.

"It doesn't make me any more hopeful about more bitcoins being found, but I do think it increases the amount of money I'll get back," said Kolin Burges, an investor who had protested outside Mt. Gox's Tokyo offices in the weeks leading up to the exchange's collapse.

"I'm more hopeful than before that we will get at least some money back from Mt. Gox," said Tetsuyuki Ooishi, a fellow at the Japan Digital Money Association. Still, he expressed disbelief that the company hadn't realized earlier it still that amount of bitcoin. "They must have checked all the bitcoin wallets when they were filing for bankruptcy protection and 200,000 is just such a big amount."

Shigeichiro Yamasaki, a professor of information security at Kinki University in Osaka, also called the announcement "puzzling" and said the announcement was telling how Mt. Gox was "very sloppy about managing others' assets."

The company couldn't be reached for further explanation.

Alas, when it comes to recoveries for end users, we wouldn't hold our breath, considering the contractual claims that would have be satisfied first before any customers get recoveries. This is especially true if the most recent bout of bitcoin selling, which pushed the currency to its lowest level since early March accelerates. In that case even if a few more wallets are mysteriously uncovered, it would be cold comfort to users who bought at far higher prices only to ultimately get a "currency" worth substantially less.